Most
workers need a workplace retirement plan to supplement their Social Security to
achieve an adequate retirement income — defined here as a 70 percent
replacement rate at age 65. However, only 44 percent of workers in the United
States participate in a retirement plan at work. The lack of retirement
readiness is not caused by the Great Recession but by two structural trends:
not enough people have access to a retirement plan at work and, when they do,
the amounts saved are often not enough to ensure adequate retirement living
standards.

Between 1999 and 2011, the availability, distinct from participation, of
employer-sponsored retirement plans in the United States declined from 61
percent to 53 percent. [Ghilarducci, Teresa and Saad-Lessler, Joelle.
“Explaining the Decline in Offer Rate of Employer Retirement Plans Between
2001-2012,” Schwartz Center for Economic Policy Analysis and Department of
Economics, The New School for Social Research, Working Paper Series, 2014.
Forthcoming in the Industrial and Labor Relations Review.] All workers,
regardless of sex, race, industry, firm size, and union status, experienced a
drop in coverage rates. However, being in a union was somewhat protective;
union workers experienced a 6 percent drop in coverage while non-union worker
rates dropped 14 percent.

The
research study evaluated pension fund management of Ethiopian social security
agency. To attain these objectives, eleven years’ financial statements were
used as a secondary data and different ratio analysis was carried out to
examine the status of fund management of Ethiopian social security agency.
Those ratios shows that the organization current assets is very much large when
compared with its current liabilities which shows the organization is in the
best position to pay off all of its current liability. Again, the finding
displays the asset turnover has been decreasing from time to time which shows
under utilization of companies asset. In addition to this, large percentage of
the asset of social security is financed by equity and small percentage is
financed by debt. Lastly, the analysis puts that the organization is absorbent
up to 50% of its income. That means up to 50% of them is consumed by its
expenses.

Accounting
for pension obligations has been co-evolving with political and financial
economic strategies aimed to prompt and promote active financial markets and
institutional investors, as well as transnational harmonisation and convergence
of accounting standards between private and public sectors. In this context,
our article provides a theoretical analysis of accounting for pension obligations,
drawing upon a comprehensive review of existing practice and regulation. The
latter are still inconsistent with the actuarial representation that has been
adopted by the IPSAS 25 (Employee Benefits) and the IAS 19 (Employee Benefits).
According to our frame of analysis, a variety of viable modes of pension
management exists and shall be acknowledged by accounting and financial
regulations. Accounting (and financial economic) concepts and regulatory
recommendations are then elaborated in view to clarify and improve on pension
protection, that is, the assurance of continued provision of pension payments
at their agreed levels under viable alternative modes of pension management.

Former Arkansas governor Mike Huckabee is setting out on a populist course in
hopes of securing the Republican nomination for president in 2016. Among other
things, he has come out against the next round of free-trade agreements. He also
wants to be seen as the GOP defender of middle-class entitlement programs. In
announcing his candidacy, he said, “If Congress wants to take away someone’s
retirement, let them end their own congressional pensions — not your Social
Security.”

Huckabee’s populism is music to the ears of some conservatives in Washington.
They want the GOP to adjust its economic message going into 2016. They argue
that the Republican nominee for president will need to do much better among
working-class voters than 2012 nominee Mitt Romney, especially in the Midwest.

They are right about that, of course. But there’s got to be a better way to
go about it than Huckabee-style populism.

This article examines how changing demographics might affect the number of adult OASDI beneficiaries and SSI recipients who need a representative payee to manage their benefit payments. The authors use administrative data and projections from the Modeling Income in the Near Term (MINT) model to project the number of beneficiaries who will need a representative payee, with detail by beneficiary age, program type, and type of payee. Demand for representative payees is projected to grow over the next two decades as the retired-worker population increases. Because retired-worker beneficiaries are less likely than disabled-worker beneficiaries to have a family member serve as their representative payee, the Social Security Administration will need to increase efforts to recruit and monitor nonfamily representative payees. The authors describe ongoing agency efforts to prepare for the projected growth in demand for representative payees.

This article examines the employment and earnings of Disability Insurance beneficiaries and working-age Supplemental Security Income recipients across detailed primary-impairment categories. The authors use 2011 data from linked Social Security administrative files to identify which beneficiaries and recipients are most likely to have earnings and to have higher levels of earnings. They find substantial heterogeneity in these outcomes across primary impairments.

This article provides an update of the relationship between pension plan coverage and firm size among private-sector workers, using data from the Survey of Income and Program Participation (SIPP) for 3 years: 2006, 2009, and 2012. Following previous work, our measures of pension coverage and participation take into account, and correct for, survey-response errors in the SIPP by using information in the W-2 records regarding tax-deferred earnings to defined contribution plans. The authors' findings show that compared with 2006, the offer and participation rates of any pension plan slightly increased in 2009 and 2012. Throughout the 2006–2012 period, offer and participation rates differed substantially by firm size, whereas there was little difference in the take-up rate.

In 2011, the Census Bureau released its first report on the Supplemental Poverty Measure (SPM). The SPM addresses many criticisms of the official poverty measure, and its intent is to provide an improved statistical picture of poverty. This article examines the extent of poverty identified by the two measures. The authors present a detailed examination of poverty among nonaged adults (those aged 18–64). For a more comprehensive view of poverty and comparison purposes, some findings are presented for younger and older segments of the population.

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The Wall Street Journal reports on new research from the Center for Retirement Research at Boston College showing that the percentage of Americans filing for early – meaning, reduced – Social Security retirement benefits has fallen in recent years.

A new study from the Center for Retirement Research at Boston College—titled Trends in Social Security Claiming —finds that, in 2013, 36% of men and 40% of women who turned 62 claimed Social Security. Sixty-two is the youngest age at which most people become eligible for benefits.

Those figures differ significantly from the numbers published by the Social Security Administration, which estimated that 42% of men and 48% of women who claimed retiree benefits in 2013 were 62.

What’s more, according to the Boston College study, “the share of people claiming Social Security retired-worker benefits when they attain age 62 has been falling since the mid-1990s…a decline [that] is fully consistent with the increase in the average retirement age.”

Sen. Orin Hatch (R-UT) introduced three pieces of legislation relating to the Social Security Disability Insurance program, which is facing insolvency next year. Hatch's bills are companion legislation to bills already introduced in the House by Rep. Sam Johnson (R-TX).
These include:

The Guiding Responsible and Improved Disability Decisions (GRIDD) Act, S. 1194, requires the Social Security Administration (SSA) to update its medical and vocational "grids" used by disability decision makers. The "grid rules" use age, education, past work experience and capacity for work to create guidelines that assist in determining whether an individual is or is not disabled. SSA published the grid rules in 1979, but the rules have not be updated to stay current with the modern workplace or developments in medicine and technology. This update would also include rules related to applicants' inability to communicate in English, based on a recent instance in Puerto Rico where it was reported the "grid rules" in place would prevent Spanish-speaking claimants from finding work. Additional background available at:http://www.finance.senate.gov/download/?id=1756E071-D2BD-4038-B86B-418FB6797B35.

The Promoting Opportunity through Informed Choice Act, S. 1197, provides support for disability beneficiaries that want to return to work by requiring the SSA to develop public online tools to assist beneficiaries in determining the impact of earnings on their eligibility for benefits they receive. Additional background available at: http://www.finance.senate.gov/download/?id=ACAD09BF-D21D-4019-BE94-9F664F37316F.

The Disability Evidence Integrity Act, S. 1198, deters the SSA from making determinations on disabled individuals to receive DI benefits based on evidence provided by individuals who have been convicted of a felony or are expelled from participating in any Federal health care program. These individuals are sometimes referred to as "dirty docs." Additional background available at:http://www.finance.senate.gov/download/?id=FF3708A8-8632-4090-A15A-4453159B2CAB.

Hatch said: "For far too long, the SSDI program has failed to keep up with the rapid changes in medicine, technology and education," Hatch said. "These bills are the first step in modernizing the SSDI program to make it more effective and efficient for both beneficiaries and taxpayers. With the trust fund expected to be exhausted in 2016, Congress should continue to examine how to address the financial challenges facing SSDI while also looking for ways to improve the program for beneficiaries."
Read more!

Bloomberg’s Dave Weigel looks at former Arkansas Gov. Mike Huckabee, leader of what Weigel calls the Republican “Save Social Security” caucus. Unfortunately, as Weigel notes, Huckabee isn’t particularly clear about what he would do to save it.

In the middle of Mike Huckabee's presidential announcement, his populism took him to a land many Republican candidates fear to tread.

"There are some who propose that to save the safety nets like Medicare and Social Security, we ought to chop off the payments for the people who have faithfully had their paychecks and pockets picked by the politician, promising them that their money would be waiting for them when they were old and sick," said Huckabee. "My friend, you were forced to pay for Social Security and Medicare. For 50 years, the government grabs the money from our paychecks and says it'll be waiting for us when we turn 65. If Congress wants to take away someone's retirement, let them end their own congressional pensions, not your Social Security."

As with a lot of the speech, the words hung together splendidly but the math was TBD.

The current trajectory of explosive growth in federal debt and entitlement spending is fiscally untenable and will unduly burden future generations.

This plan focuses on tax reform proposals that raise necessary revenues with the least possible impact on saving and economic growth and on entitlement spending reform proposals that make those programs better targeted and more efficient.

These proposals would improve fiscal stability and economic growth and hold the national debt to 62.7 percent of annual gross domestic product in 2040 by narrowing the fiscal imbalance, limiting the size of government, and adopting a more growth-friendly tax code.

CRR announces new research grants for junior faculty and Ph.D. students.

Thanks to our supporters:The Social Security Administration, the Alfred P. Sloan Foundation, Boston College, the Center for Satate and Local Government Excellence, FINRA Investor Education Foundation, IMPAQ International, the National Institute on Aging, Prudential Financial, and the State of Connecticut.

Sunday, May 10, 2015

Over at the Corner, my AEI colleague Ramesh Ponnuru looks at former Arkansas Gov. Mike Huckabee’s shameless – and I think mistaken – pitch to seniors as Huckabee launches his campaign for the GOP presidential nomination. Huckabee says:

“You were forced to pay for Social Security and Medicare for 50 years. The government grabs money from our paychecks and says it will be waiting for us when we turn 65. If Congress wants to take away someone’s retirement, let them end their own Congressional pensions-not your Social Security. As President, I promise you will get what you paid for!”

One problem with this statement is basic math: since Social Security and Medicare are (vastly) underfunded, we either need to pay more in or get less out. Sure, politicians promised us a certain benefit formula, but they also promised a certain tax rate. Huckabee implicitly asserts that changes should be in the tax side, not the benefit side. Good luck running in a Republican primary on that platform.

Second, as Ramesh points out, Huckabee’s support for the Fair Tax implies a 30% sales tax on goods and services. So seniors’ benefits might not be cut under a Huckabee administration, but the amount they could buy with their benefits would fall by 30%. Again, good luck.

Finally, Huckabee’s basic “get what you paid for” statement is incorrect: by law, Social Security benefits will be cut when the trust fund runs out (next year for disability, in the early 2030s for retirement). Whatever you may believe about the economics of the trust fund – personally, not much – the trust funds’ exhaustion is by definition a signal that Americans haven’t paid enough to fund the benefits they’ve been promised. In other words, Huckabee’s Social Security policy could be to slash benefits across the board by 25% when the trust fund runs out and that policy would be entirely consisting with his promise that “you will get what you paid for.” Just not a penny more.

This paper presents key findings from the 25th annual Retirement Confidence Survey (RCS), a survey that gauges the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with regard to various aspects of retirement, and related issues. The 2015 RCS by EBRI/Greenwald & Associates finds that the nation’s retirement confidence continues to rebound from the record lows experienced between 2009 and 2013 -- but this is based on the increasing optimism of those who indicate they and/or their spouse have a retirement plan. The percentage of workers confident about having enough money for a comfortable retirement, at record lows between 2009 and 2013, increased in 2014 and again in 2015. Twenty-two percent are now very confident (up from 13 percent in 2013 and 18 percent in 2014), while 36 percent are somewhat confident. Twenty-four percent are not at all confident (statistically unchanged from 28 percent in 2013 and 24 percent in 2014). The increased confidence since 2013 is strongly related to retirement plan participation. Among those with a plan, the percentage very confident increased from 14 percent in 2013 to 28 percent in 2015. In contrast, the percentage very confident remained statistically unchanged among those without a plan (10 percent in 2013, 9 percent in 2014, and 12 percent in 2015). Retiree confidence in having a financially secure retirement, which historically tends to exceed worker confidence levels, also increased, with 37 percent very confident (up from 18 percent in 2013 and 27 percent in 2014). The percentage not at all confident was 14 percent (statistically unchanged from 14 percent in 2013 and 17 percent in 2014). Worker confidence in the affordability of various aspects of retirement has also rebounded. In particular, the percentage of workers who are very confident in their ability to pay for basic expenses has increased (37 percent, up from 25 percent in 2013 and 29 percent in 2014). The percentages of workers who are very confident in their ability to pay for medical expenses (18 percent, up from 12 percent in 2011) and long-term care expenses (14 percent, up from 9 percent in 2011) are slowly inching upward. Cost of living and day-to-day expenses head the list of reasons why workers do not save (or save more) for retirement, with 50 percent of workers citing these factors. Nevertheless, many workers say they could save a small amount more. Seven in 10 (69 percent) state they could save $25 a week more than they are currently saving for retirement.

This paper takes a comprehensive look at the financial situation of older Americans at the end of their lives. In particular, it documents the percentage of households with a member who recently died with few or no assets. It also documents the income, debt, home-ownership rates, net home equity, and dependency on Social Security for households that experienced a recent death. Significant findings include that among those who died at ages 85 or above, 20.6 percent had no non-housing assets and 12.2 percent had no assets left. Among singles who died at or above age 85, 24.6 percent had no non-housing assets left and 16.7 percent had no assets left. Data show those who died at earlier ages were generally worse off financially: 29.8 percent of households that lost a member between ages 50 and 64 had no assets left. Households with at least one member who died earlier also had significantly lower income than households with all surviving members. The report shows that among singles who died at ages 85 or above, 9.1 percent had outstanding debt (other than mortgage debt) and the average debt amount for them was $6,368. The report also shows that the importance of Social Security to older households cannot be overstated. For recently deceased singles, it provided at least two-thirds of their household income. Couple households above 75 with deceased members received more than 60 percent of their household income from Social Security. The data for this study come from the University of Michigan’s Health and Retirement Study (HRS), which is sponsored by the National Institute on Aging, and is the most comprehensive national survey of older Americans.

Since “big data” is changing so many aspects of the business world, how is it affecting the way health and retirement benefits are provided to private-sector workers? This paper summarizes the presentations and discussion at the Dec. 11, 2014, EBRI policy forum held in Washington, DC, on the topic, “Measured Matters: The Use of ‘Big Data’ in Employee Benefits:” the use of massive amounts of data and computer-driven data analytics to determine how people behave when it comes to health and retirement plans, which programs work or do not, and how to get better results at lower cost. EBRI’s 75th biannual policy forum last December delved into both the status and promise of this trend before an audience of about a hundred benefits professionals and policymakers. Two panels of experts -- one focusing on health and the other on retirement -- provided an overview of what employers, researchers, and data analysts are currently doing, what they hope to be doing, and what seems to be working so far. Speakers included employers, research and analytic experts, health and retirement plan executives, and consultants. Among the broad areas of agreement: Employers and researchers are making a major commitment to capturing and analyzing the vast amount of health and retirement data in their benefit plans; the health sector is considerably farther down the road than the retirement sector in using data analytics in benefits plan design and management, but both fields are in the very early stages of using big data; many workers are already seeing the results of this trend, such as the rapidly growing use of electronic medical records and their ability to access their own health records online; the science of applied mathematics seems destined to dominate the art of employee benefits.

This article discusses when a pension or welfare plan governed by ERISA must comply with state law reporting, record-keeping and disclosure mandates. Any such mandate directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party's interaction with an ERISA plan, would seem prima facie to relate to an ERISA plan. Thus, at first blush, any such mandate would appear to be preempted. However, this approach is obviously incorrect. It would preclude a state from compelling a pension plan or its participants from filing tax reports about benefit distributions. On the other hand, such plan mandates do not affect plan benefit structures or the administration of those structures other than requiring such reports, record-keeping, or disclosure, and imposing cost burdens on the plan. Thus, at second blush, all such mandates seem permissible. However, this approach is obviously incorrect. It would permit a state to compel plans to provide reports so that the state could regulate plan fiduciary conduct or to make large expenditures to generate and keep records with little utility. This article argues for a common sense approach. ERISA permits a state-law reporting or disclosure mandate directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party interacting with an ERISA plan, such as a service provider, that implements a state law that ERISA does not otherwise preempt, but only to the extent the mandate is needed for the effective administration of such state law. If ERISA preempted a mandate needed to implement a state law not otherwise preempted, the state law would in practice be preempted. The effective administration requirement prevents undue interference with ERISA's benefit protections other than the reporting, record-keeping and disclosure mandate. If the state mandate is generally applicable, rather than principally applicable to ERISA plans, there would be a rebuttable presumption that the mandate is so limited. ERISA preempts all other reporting and disclosure mandates directed at an ERISA plan, a plan participant or beneficiary, a plan sponsor or contributing employer, or a third party interacting with an ERISA plan, such as a third party administrator, even if the compliance burdens are slight. Preemption is unaffected by whether the mandate arises from a law that explicitly refers to ERISA. Plan sponsors must comply with all state-law mandates that ERISA does not preempt regardless of plan terms. On the other hand, plan administrators must comply with all state-law mandates with which plan terms require compliance. This approach recognizes that the preemption of a state-law reporting and disclosing mandates is determined by whether it unduly interferes with the other ERISA benefit protections. Thus, states may require employers to report their contributions to ERISA plans needed to show compliance with those prevailing wage laws that ERISA permits. Thus, state courts considering contract claims by a supplier to an ERISA plan may require the plan to respond to discovery requests with respect to the claim. Thus, states may require those plans subject to the QDRO rules to disclose, to an individual eligible to use a QDRO, the information that may be needed to have a state court prepare and issue a QDRO granting the individual plan benefit rights, but not other information that is not so needed. Thus, states may require ERISA plans to file reports and respond to audit request with respect to the healthcare, if any, they provide that the states may regulate. Thus, states may require ERISA health reimbursement plans, their insurers, or their third party administrators to report claims experience, including price data, if ERISA permits the states to assemble, maintain, and perhaps publicize, such a data base, but only to the extent the mandate is needed for the effective administration of the permitted activities.

Sen. Lindsay Graham is an entitlement reform hero – a guy who’s been willing to get out there on crucially important but politically unpopular issues. But in a discussion of his potential presidential campaign (probability 0.925, he says) he makes what I now consider to be a mistake on entitlement reform: fixing Social Security, he says, “so simple you could do it on the back of a napkin.”

I used to think that. You can go to a list of reform options – raising the retirement age, cutting COLAs, whatever you like – and patch them together until the savings are enough to erase the long-term deficit. And you’re done.

Here’s the problem: that approach assumes that Social Security is working perfectly, with the exception of being underfunded. In other words, Social Security policy effectively has one lever, with one end labeled ‘More Taxes’ and the other ‘Less Benefits.’

But if Social Security isn’t working perfectly then the Chinese-menu approach will cement in place problems that could be fixed. And, by being fixed, make Social Security work better even while we’re lowering costs.

For instance, Social Security leaves almost 1-in-10 retirees in poverty, despite spending $900 billion per year. We could give every retiree a poverty-level benefit and take the elderly poverty rate to zero for about half that amount. That’s pretty much what I’ve proposed.

Likewise, Social Security penalizes people who choose to delay retirement. If you continue to work, you’ll continue to pay taxes. But, on average, you’ll receive only 3 cents in extra benefits for each dollar of taxes you pay. So why not cut the payroll tax on older workers?

Similarly, the Social Security disability program could be reformed to encourage rehabilitation and re-employment rather than disability and dependency. But those reforms have nothing to do with tax rates or benefit formulas.

In other words, Social Security is an underfunded government program. Meaning, it’s underfunded and it’s a government program. We can make improvements on both ends of that equation.

The 2015 Social Security Technical Panel on Assumptions and Methods will hold a two-day public meeting on Thursday andFriday, May 7th and 8th. On Thursday, May 7 the meeting will be from 9:00am to 5:00pm, and on Friday May 8 from 8:30am to 4:00pm. The meeting will be held in the offices of the Social Security Advisory Board (400 Virginia Ave S.W., Suite 625, Washington, DC).

Tuesday, May 5, 2015

It is a truth universally acknowledged that Americans are underprepared for retirement. And given this sad fact, there’s a growing movement on the left saying we need a government solution, stat: specifically, an expansion of Social Security benefits.

Perhaps you are confused. Weren’t we just talking about entitlement reform so that we could spend less on the program? Why, yes, we were. But since no one, left or right, really wants to take on our vast army of retirees, that chatter has died down. Now that it has, progressives have decided that the best defense is a good offense. Instead of reluctantly agreeing to a compromise where Republicans let some taxes rise and Democrats agree to entitlement cuts, they’re demanding bigger tax hikes to fund bigger entitlements. At the core of their argument is a good point: Americans really do need more money for retirement. But missing is a realistic discussion of where that money might come from.

Brenton Smith, writing in The Hill, takes on Gov. Chris Christie’s proposal to means-test Social Security benefits for high-income retirees.

Christie's proposal contained a controversial policy option of means-testing benefits. Some believe that phasing-out benefits for higher-income Americans should be the first option to consider for addressing the financing gap in Social Security. This alternative should be the last. It introduces terrible incentives to the system, and begs questions about how we pay for benefits.

I took on the issue of mean-testing in National Affairs a couple years back. Worth checking out if you’re interested in the issue.

An additional issue I don’t think I considered at the time: Social Security benefits for high-income retirees are subject to income taxes. So the gain to the system’s financing from means-testing is the amount of the benefit cut – which is usually pretty small, on a system-wide basis – minus the income taxes that would have been collected on those benefits. It doesn’t really seem worth the effort.

The Supplemental Security Income (SSI) program provides federally-funded income support for individuals with disabilities, and has become one of the most important means-tested transfer programs in the United States. Previous studies have examined the effects of economic conditions on growth in disability caseloads, but most focus on the Social Security Disability Insurance (SSDI) program. Most work on SSI dates from before welfare reform, which had both direct and indirect effects on the composition of the population at risk for SSI participation. In this paper we examine the relationship between SSI application risk and economic conditions between 1996 and 2010, using data from the Survey of Income and Program Participation (SIPP) linked to the Social Security Administration’s 831 file, which includes monthly data on SSI (and SSDI) application and receipt. Results from hazard models suggest that higher state unemployment rates have a large, positive effect on the risk of SSI application among jobless individuals, and our evidence suggests that female potential applicants may be more responsive to local economic conditions than men. State-level TANF policies have no effect on SSI application risk but state fiscal distress significantly increases application risk. Given the continued growth of the SSI program, understanding these relationships is increasingly important and policy-relevant.

The Supplemental Security Income program (SSI) provides a guaranteed income for the elderly. As such it can serve to mitigate any deleterious effects of reductions in Social Security benefits that might result from any Social Security reform. However, participation in SSI among qualified individuals has proven to be low. We show that this low participation rate, just over 50%, observed at the program’s inception has continued to today with little if any change. We also find that transfers from children are far larger among eligible non-participants suggesting that family assistance may offset the need for public assistance.

About me

I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.